Judge Rules That Celsius Network Owns Customer’s Crypto Assets• January 9, 2023 7:50 pm • Comments
Celsius Network was a crypto lender that had gone bankrupt last year and left many users of the platform unable to access their own crypto assets.
As part of the bankruptcy legal process, a US judge has now ruled that Celsius Network now actually owns most of the crypto that customers had deposited.
Obviously, this will spark major disappointment and criticism from the crypto community and solidifies the well-known fact that you do not actually own your crypto if it is not in your own personal wallet.
As a result of this ruling, this means that customers of Celsius Network will likely never see the full value of their assets ever returned to them.
This new ruling by the judge impacts a total amount of $4.2 billion in assets back when the company had filed for bankruptcy.
A bankruptcy judge ruled that digital coins deposited in Celsius Network's interest-bearing accounts belong to the firm, ruling against thousands of customers and deciding a key legal issue in crypto-related insolvencies https://t.co/5meVPHhSVE
— The Wall Street Journal (@WSJ) January 4, 2023
The ruling means that most Celsius customers will be lower priority than customers who held non-interest bearing accounts and other secured creditors. It was unclear whether Celsius has significant secured debt.
The ruling also prevents in-fighting for higher priority among customers with interest-bearing accounts, avoiding a situation in which some of those customers are repaid 100% of their deposits while similarly-situated customers are able to recover “only a small percentage” of their deposits, according to Glenn.
Celsius’ terms of service made clear that the crypto lender took ownership of customer deposits into its interest-bearing Earn accounts, according to Glenn.
That means that Earn customers will be treated as unsecured creditors in Celsius’ bankruptcy, and they will be last in line for repayment after Celsius repays higher-priority debts.
There was a lot of debate to this judge’s ruling however and it seems that there are already some objections.
The counter argument to Celsius Network’s claim to the assets is whether or not the users of the platform were aware of these conditions in the first place.
If it can be argued that they were not reasonably aware, there might be a chance to prevent the company from abusing the terms and conditions policy that was laid out.
Regardless of the outcome, the event sets the precedent that all investors should use these crypto platforms to trade and acquire assets, but never to actually store their assets.
The age old advice in crypto is that if you don’t own the private keys of the wallet, then you don’t actually control the assets.
#cryptonews: If you are one of the roughly 600,000 people who entrusted $4.2 billion to an interest-bearing account with Celsius Network, a bankruptcy judge just said it doesn't belong to you… 🧐https://t.co/qGBv77EfU7
— CoinMarketCap (@CoinMarketCap) January 5, 2023
“The issue of ownership of the assets in the Earn Accounts is a contract law issue. The Debtors and Committee argue that the cryptocurrency assets deposited in Earn Accounts were owned by the Debtors and are now property of the Estates.
Many Earn account holders (‘Account Holders’) argue that the Account Holders, rather than Celsius, own the cryptocurrency assets in the Earn Accounts and that cryptocurrency assets should promptly be returned to them,” Glenn wrote.
Some of these account holders had argued that Celsius was in breach of its own contract or that Celsius had “failed to uphold its fiduciary duties,” but the judge called Celsius’s terms of service “unambiguous.”
The court will hold a hearing on Jan. 10, 2023, at 11:00 a.m. ET to discuss a motion on when Celsius creditors can submit their claims by.
A filing from Kirkland & Ellis attorney Joshua Sussberg currently proposes Feb. 9, 2023, as the deadline for proofs of claim, extending certain existing deadlines if approved.
JUST IN: Judge grants Celsius Network ownership rights to $4.2 billion in customer #crypto deposits.
— Watcher.Guru (@WatcherGuru) January 4, 2023
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